the Episcopal Diocese of Fort Worth v. the Episcopal Church

• Court: Texas Supreme Court
• Decided: August 30, 2013
• Docket: 11-0265
• Status: Published

Opinion

IN THE SUPREME COURT OF TEXAS 444444444444 NO . 11-0265 444444444444

THE EPISCOPAL DIOCESE OF FORT WORTH, ET AL., PETITIONERS, v.

THE EPISCOPAL CHURCH, ET AL., RESPONDENTS

4444444444444444444444444444444444444444444444444444 ON DIRECT APPEAL FROM THE 141ST DISTRICT COURT , TARRANT COUNTY , TEXAS 4444444444444444444444444444444444444444444444444444

Argued October 16, 2012

JUSTICE JOHNSON delivered the opinion of the Court, in which JUSTICE HECHT , JUSTICE GREEN , and JUSTICE GUZMAN joined, and in Parts I, II, III, and IV-A of which CHIEF JUSTICE JEFFERSON joined.

JUSTICE WILLETT filed a dissenting opinion, in which JUSTICE LEHRMANN , JUSTICE BOYD , and JUSTICE DEVINE joined.

This direct appeal involves the same principal issue we addressed in Masterson v. Diocese

of Northwest Texas, ___ S.W.3d ___ (Tex. 2013): what methodology is to be used when Texas

courts decide which faction is entitled to a religious organization’s property following a split or

schism? In Masterson we held that the methodology referred to as “neutral principles of law” must

be used. But, in this case the trial court granted summary judgment on the basis of the “deference”

or “identity” methodology, and the record does not warrant rendition of judgment to either party

based on neutral principles of law. We reverse and remand to the trial court for further proceedings.

I. Background

The Episcopal Church (TEC) is a religious organization founded in 1789. It has three

structural tiers. The first and highest is the General Convention. The General Convention consists

of representatives from each diocese and most of TEC’s bishops. It adopts and amends TEC’s

constitution and canons. The second tier is comprised of regional, geographically defined dioceses.

Dioceses are governed by their own conventions. Each diocese’s convention adopts and amends its

own constitution and canons, but must accede to TEC’s constitution and canons. The third tier is

comprised of local congregations. Local congregations are classified as parishes, missions, or

congregations. In order to be accepted into union with TEC, missions and congregations must

subscribe to and accede to the constitutions and canons of both TEC and the Diocese in which they

are located.

In 1982 the Episcopal Diocese of Fort Worth (the Diocese or Fort Worth Diocese) was

formed after the Episcopal Diocese of Dallas voted to divide into two parts. The Fort Worth Diocese

was organized “pursuant to the Constitution and Canons of the Episcopal Church” and its convention

adopted a constitution and canons. The Diocese’s constitution provided that all property acquired

for the Church and the Diocese “shall be vested in [the] Corporation of the Episcopal Diocese of Fort

Worth.” The canons of the Diocese provided that management of the affairs of the corporation

“shall be conducted and administered by a Board of Trustees of five (5) elected members, all of

whom are either Lay persons in good standing of a parish or mission in the Diocese, or members of

the Clergy canonically resident in the Diocese.” The Bishop of the Diocese was designated to serve

2 as chair of the board of the corporation. After adopting its constitution and canons the Diocese was

admitted into union with TEC at TEC’s December 1982 General Convention.

In February 1983, the Fort Worth Diocese filed articles of incorporation for the Fort Worth

Corporation. That same year the Dallas and Fort Worth Dioceses filed suit in Dallas County and

obtained a judgment transferring part of the Dallas Diocese’s real and personal property to the Fort

Worth Diocese. The 1984 judgment vested legal title of the transferred property in the Fort Worth

Corporation, except for certain assets for which the presiding Bishop of the Dallas Diocese and his

successors in office had been designated as trustee. The judgment transferred the latter assets to the

Bishop of the Fort Worth Diocese and his successor in office as trustee.

Doctrinal controversy arose within TEC, leading the Fort Worth Corporation to file

amendments to its articles of incorporation in 2006 to, in part, remove all references to TEC. The

corporate bylaws were similarly amended. The 2007 and 2008 conventions of the Fort Worth

Diocese voted to withdraw from TEC, enter into membership with the Anglican Province of the

Southern Cone, and adopt amendments to the Diocese’s constitution removing references to TEC.1

TEC responded. It accepted the renunciation of Jack Iker, Bishop of the Fort Worth Diocese,

and TEC’s Presiding Bishop removed Iker from all positions of authority within TEC. In February

2009, TEC’s Presiding Bishop convened a “special meeting of Convention” for members of the Fort

Worth Diocese who remained loyal to TEC. Those present at the meeting elected Edwin Gulick as

Provisional Bishop of the Diocese and Chair of the Board of Trustees for the Fort Worth

1 Three parishes in the Diocese did not agree with the actions and withdrew from the Diocese. The Fort W orth Corporation transferred property used by the withdrawing parishes to them.

3 Corporation. The 2009 Convention also voted to reverse the constitutional amendments adopted at

the 2007 and 2008 Conventions and declared all relevant offices of the Diocese to be vacant. Bishop

Gulick then appointed replacements to the offices declared vacant, including the offices of the

Trustees of the Corporation. TEC recognized the persons elected at the 2009 Convention as the duly

constituted leadership of the Diocese.

TEC, Rev. C. Wallis Ohls, who succeeded Bishop Gulick as Provisional Bishop of the

Episcopal Diocese of Fort Worth, and clergy and lay individuals loyal to TEC (collectively, TEC)

filed suit against The Episcopal Diocese of Fort Worth, the Fort Worth Corporation, Bishop Iker,

the 2006 trustees of the corporation, and former TEC members (collectively, the Diocese), seeking

title to and possession of the property held in the name of the Diocese and the Fort Worth

Corporation.2 Both TEC and the Diocese moved for summary judgment. A significant disagreement

between the parties was whether the “deference” (also sometimes referred to as the “identity”) or

“neutral principles of law” methodology should be applied to resolve the property issue. TEC

contended that pursuant to this Court’s decision in Brown v. Clark, 116 S.W. 360 (Tex. 1909), the

deference methodology has been applied in Texas for over a century and should continue to be

applied. Under that methodology, it argued, TEC was entitled to summary judgment because it

recognized Bishops Gulick and Ohls, the leaders elected at the 2009 convention, and the appointees

of the Bishops as the true and continuing Episcopal Diocese. TEC also contended that even if the

2 The defendants sought mandamus in the court of appeals regarding whether the attorneys for TEC had authority to file suit on behalf of the Corporation and the Diocese. See In re Salazar, 315 S.W .3d 279 (Tex. App.— Fort W orth 2010, orig. proceeding). The court of appeals conditionally granted mandamus relief, holding they did not. Id. at 285-86.

4 neutral principles methodology were applied, it would be entitled to summary judgment. The

Diocese, on the other hand, contended that in Brown this Court effectively applied the neutral

principles methodology without specifically calling it by that name, and Texas courts have continued

to substantively apply that methodology to resolve property issues arising when churches split.

Under the neutral principles methodology, the Diocese argued, it was entitled to summary judgment

affirming its right to the property. The Diocese also maintained that even if the deference

methodology were applied, it would still be entitled to summary judgment.3

The trial court agreed with TEC that deference principles should apply, applied them, and

granted summary judgment for TEC. The Diocese sought direct appeal to this Court and we noted

probable jurisdiction. We had previously granted the petition for review in Masterson, and we heard

oral arguments for both cases on the same day.

II. Jurisdiction

The Government Code provides that “[a]n appeal may be taken directly to the supreme court

from an order of a trial court granting or denying an interlocutory or permanent injunction on the

ground of the constitutionality of a statute of this state.” TEX . GOV ’T CODE § 22.001(c). The trial

court granted summary judgment and issued injunctions ordering the defendants to surrender all

Diocesan property and control of the Diocesan Corporation to the Episcopal Diocese of Fort Worth,

and ordering the defendants to desist from holding themselves out as leaders of the Diocese. While

3 The Diocese also asserts that we should dismiss certain tort claims TEC brought against individual defendants. The Diocese moved for summary judgment to dismiss these claims and argues that if we conclude the trial court erred in determining who was entitled to the property at issue, we should render the judgment the trial court should have rendered and dismiss the tort claims. Because of our disposition of the issue regarding who is entitled to the property, we do not address those claims.

5 the trial court order did not explicitly address the constitutionality of a statute, “[t]he effect of the

trial court’s order . . . is what determines this Court’s direct appeal jurisdiction.” Tex. Workers’

Compensation Comm’n v. Garcia, 817 S.W.2d 60, 61 (Tex. 1991).

In its motion for summary judgment TEC argued, in part, that the actions of the Board of

Trustees in amending the Fort Worth Corporation’s articles of incorporation were void because the

actions went beyond the authority of the corporation, which was created and existed as an entity

subordinate to a Diocese of TEC. TEC argued that “[t]he secular act of incorporation does not alter

the relationship between a hierarchical church and one of its subordinate units” and that finding

otherwise “would risk First Amendment implications.” The Diocese, on the other hand, argued that

the case was governed by the Texas Non-Profit Corporation Act4 and the Texas Uniform

Unincorporated Nonprofit Association Act5; under those statutes a corporation may amend its

articles of incorporation and bylaws; and TEC had no power to limit or disregard amendments to the

Corporation’s articles and bylaws.

In its summary judgment order the trial court cited cases it said recognized “that a local

faction of a hierarchical church may not avoid the local church’s obligations to the larger church by

amending corporate documents or otherwise invoking nonprofit corporations law.” The trial court

substantively ruled that because the First Amendment to the United States Constitution deprived it

of jurisdiction to apply Texas nonprofit corporation statutes, applying them to determine the parties’

rights would violate Constitutional provisions. The court’s injunction requiring defendants to

4 T EX . R EV . C IV . S TAT . arts. 1396-1.01 to 1396-11.02

5 T EX . R EV . C IV . S TAT . art. 1396-70.01

6 surrender control of the Fort Worth Corporation to the Episcopal Diocese of Fort Worth was based

on that determination. The effect of the trial court’s order and injunction was a ruling that the Non-

Profit Corporation Act would violate the First Amendment if it were applied in this case.

Accordingly, we have jurisdiction to address the merits of the appeal.

III. “Deference” and “Neutral Principles”

In Masterson we addressed the deference and neutral principles methodologies for deciding

property issues when religious organizations split. ___ S.W.3d at ___. Without repeating that

discussion in full, suffice it to say that generally courts applying the deference approach to church

property disputes utilize neutral principles of law to determine where the religious organization has

placed authority to make decisions about church property. See Jones v. Wolf, 443 U.S. 595, 603-04

(1979). Once a court has made this determination, it defers to and enforces the decision of the

religious authority if the dispute has been decided within that authority structure. Id. But courts

applying the neutral principles methodology defer to religious entities’ decisions on ecclesiastical

and church polity issues such as who may be members of the entities and whether to remove a bishop

or pastor, while they decide non-ecclesiastical issues such as property ownership and whether trusts

exist based on the same neutral principles of secular law that apply to other entities. See Serbian E.

Orthodox Diocese v. Milivojevich, 426 U.S. 696, 708-09 (1976). We concluded in Masterson that

the neutral principles methodology was the substantive basis of our decision in Brown v. Clark, 116

S.W. 360 (Tex. 1909), and that Texas courts should utilize that methodology in determining which

faction of a religious organization is entitled to the property when the organization splits.

___ S.W.3d at ___. We also concluded that even though both the deference and neutral principles

7 methodologies are constitutionally permissible, Texas courts should use only the neutral principles

methodology in order to avoid confusion in deciding this type of controversy. Id.

IV. Application

A. Summary Judgment—Deference

Based on our decision in Masterson, we hold that the trial court erred by granting summary

judgment to TEC on the basis of deference principles. ___ S.W.3d at ___.

B. Summary Judgment—Neutral Principles

TEC asserts that application of neutral principles may violate free-exercise protections if, for

example, the Diocese is permitted to void its commitments to church laws because the specific

formalities of Texas law governing trusts were not followed or if they are applied retroactively. See

Jones, 443 U.S. at 606 (noting that the case did not “involve a claim that retroactive application of

a neutral-principles approach infringes free exercise rights”). But TEC recognizes that whether

application of the neutral principles approach is unconstitutional depends on how it is applied. See

id. at 606 (“It remains to be determined whether the Georgia neutral-principles analysis was

constitutionally applied on the facts of this case.”). Because neutral principles have yet to be applied

in this case, we cannot determine the constitutionality of their application. Further, TEC does not

argue that application of procedural matters such as summary judgment procedures and burdens of

proof are unconstitutional. Thus, we address the arguments of the parties regarding who is entitled

to summary judgment pursuant to neutral principles and conclude that neither TEC nor the Diocese

is. See Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex.

2010) (noting that when both parties move for summary judgment and the trial court grants one

8 motion and denies the other, appellate courts consider the summary-judgment evidence, determine

all questions presented, and render the judgment the trial court should have rendered).

Under the neutral principles methodology, ownership of disputed property is to be determined

by considering evidence such as deeds to the properties, terms of the local church charter (including

articles of incorporation and bylaws, if any), and relevant provisions of governing documents of the

general church. E.g., Jones, 443 U.S. at 602-03; see Presbyterian Church v. E. Heights, 167 S.E.2d

658, 659-60 (Ga. 1969). TEC points out that deeds to the properties involved were not part of the

summary judgment record when the trial court ruled. Thus, TEC argues, if we do not sustain the

summary judgment in its favor, we should remand the case so the trial court may consider the record

on the basis of neutral principles and the four factors referenced in Jones: (1) governing documents

of the general church, (2) governing documents of the local church entities, (3) deeds, and (4) state

statutes governing church property. See Jones, 443 U.S. at 602-03. We agree that the case must be

remanded for further proceedings under neutral principles.

Although deeds to the numerous properties involved were not before the trial court when it

granted summary judgment, the Diocese asserts that there is no dispute about its holding title to and

having control of the properties. But TEC disagrees with that position. And absent agreement or

conclusive proof of title to the individual properties and the capacities in which the titles were taken,

fact questions exist under neutral principles of law, at a minimum, about who holds title to each

9 property and in what capacity.6 Accordingly, we cannot render judgment on the basis of neutral

principles.

C. Remand

Because the trial court must apply neutral principles on remand, for its guidance we address

certain arguments made by the parties relating to that methodology. See Edinburg Hosp. Auth. v.

Trevino, 941 S.W.2d 76, 81 (Tex. 1997) (“Although resolution of this issue is not essential to our

disposition of this case, we address it to provide the trial court with guidance in the retrial . . . .”).

We first note that on remand the trial court is not limited to considering only the four factors

listed in Jones. As we said in Masterson, Jones did not purport to establish a federal common law

of neutral principles to be applied in this type of case. ___ S.W.3d at ___. Rather, the elements

listed in Jones are illustrative. If it were otherwise and courts were limited to applying some, but not

all, of a state’s neutral principles of law in resolving non-ecclesiastical questions, religious entities

would not receive equal treatment with secular entities. We do not believe the Supreme Court

intended to say or imply that should be the case.

Next we address the Diocese’s argument that under neutral principles courts do not defer to

TEC’s decisions about non-ecclesiastical matters such as the identity of the trustees of the Fort

Worth Corporation. The Diocese argues that under the Non-Profit Corporation Act the trustees are

the 2006 trustees who are named as defendants in this suit. TEC responds that the trustees are

6 Deeds filed after the trial court granted summary judgment were dated both before and after the 1984 judgment transferring properties from the Dallas Diocese. The deeds dated after the judgment reflect various grantees. Some properties were deeded to the Fort W orth Corporation or local entities, while others were deeded in trust to the Corporation, local entities, or various other persons and entities.

10 required by the corporate bylaws to be lay persons in “good standing,” the Diocese rules require them

to be loyal Episcopalians, and the bylaws provide that trustees do not serve once they become

disqualified. Those determinations, TEC argues, were made by Bishops Gulick and Ohls and the

2009 convention, and courts must defer to those determinations because they are ecclesiastical

decisions.

While we agree that determination of who is or can be a member in good standing of TEC

or a diocese is an ecclesiastical decision, the decisions by Bishops Gulick and Ohls and the 2009

convention do not necessarily determine whether the earlier actions of the corporate trustees were

invalid under Texas law. The corporation was incorporated pursuant to Texas corporation law and

that law dictates how the corporation can be operated, including determining the terms of office of

corporate directors, the circumstances under which articles and bylaws can be amended, and the

effect of the amendments. See TEX . BUS. ORG . CODE §§ 22.001–.409. We conclude that this record

fails to show that, as a matter of law, the trustees had been disqualified from serving as corporate

trustees at the relevant times. Nor does the record conclusively show whether the 2009 appointments

to the corporation board by Bishop Ohl were valid or invalid under Texas law, or whether, under

Texas law, the actions taken by the trustees appointed by Bishop Ohl in 2009 were valid or invalid.

Third, the Diocese argues that TEC has no trust interest in the property. TEC Canon I.7.4,

also known as the Dennis Canon, provides:

All real and personal property held by or for the benefit of any Parish, Mission or Congregation is held in trust for this Church and the Diocese thereof in which such Parish, Mission or Congregation is located. The existence of this trust, however, shall in no way limit the power and authority of the Parish, Mission or Congregation otherwise existing over such property so long as the particular Parish, Mission or

11 Congregation remains a part of, and subject this Church and its Constitution and Canons.

The Diocese asserts that this canon does not create a trust under Texas law, but that even if it does,

it was revocable and the Diocese revoked it when the Diocesan canons were amended to state:

Property held by the Corporation for the use of a Parish, Mission or Diocesan School belongs beneficially to such Parish, Mission or Diocesan School only. No adverse claim to such beneficial interest by the Corporation, by the Diocese, or by The Episcopal Church of the United States of America is acknowledged, but rather is expressly denied.

TEC counters that the Dennis Canon creates a trust because the corporation acceded to it and the

Diocese could not have adopted a canon revoking the trust. TEC also asserts that the statutes

applicable to charitable trusts apply, but if they do not, a resulting trust or other trust may be applied

here because the history, organization, and governing documents of the Church, the Diocese, and the

parish support implication of a trust. The Diocese responds to TEC’s arguments by referencing

Texas statutory law requiring a trust to be in writing and providing that trusts are revocable unless

they are expressly made irrevocable. See TEX . PROP . CODE § 112.004, .051. These issues were not

addressed by the trial court because it granted summary judgment based on deference principles.

Upon remand the parties will have the opportunity to develop the record as necessary and present

these arguments for the trial court to consider in determining the rights of the parties according to

neutral principles of law. But regarding the trial court’s consideration of the issue, we note that in

Masterson we addressed the Dennis Canon and Texas law. There we said that even assuming a trust

was created as to parish property by the Dennis Canon and the bylaws and actions of a parish non-

profit corporation holding title to the property, the Dennis Canon “simply does not contain language

12 making the trust expressly irrevocable.... Even if the Canon could be read to imply the trust was

irrevocable, that is not good enough under Texas law. [Texas Property Code § 112.051] requires

express terms making it irrevocable.” Masterson, ___ S.W.3d at ___.

Finally, as to the argument that application of neutral principles may pose constitutional

questions if they are retroactively applied, we note that over a century ago in Brown v. Clark, 116

S.W. 360 (Tex. 1909), our analysis and holding substantively reflected the neutral principles

methodology.

V. Conclusion

We reverse the judgment of the trial court and remand the case to that court for further

proceedings consistent with this opinion.

________________________________________ Phil Johnson Justice

OPINION DELIVERED: August 30, 2013